There are just a handful of options available for those with poor credit scores as no bank is willing to entertain your application for loans when you have defaults or bankruptcy on the credit report. Thus, all you can do is trying for a secure loan in exchange of keeping your house or car as collateral. Using a car as collateral makes better financial sense. But you need to be aware of the drawbacks in case you are unable to pay the loan.
Usually unscrupulous auto title loan lenders target people with poor credit, elderly individuals and those with low income and make money off them with high interest rates. Thus, it is best to deal with only those that are BBB accredited. Shortlist the services that seem reliable and are BBB accredited and then cross check with the local BBB service to ensure you are not caught in the web of debt by taking a auto title loan.
These types of title loans are simple to understand. Basically you are putting your vehicle, which has been paid for as collateral and the pink slip on your car is signed over to the lender. These loans are short term loans that are given for a period of 30 days and after that penalties or high interest is applicable. In case, the loan amount and associated interest is not paid, the lender is authorized to sell your car and get the amount that is due.
When you apply for an auto title loan, make sure you go through all of the details that are given in the contract. Ensure that you particularly read the part that mentions the interest rates. Note if the interest rate applicable is per month or on a yearly basis. A 4% interest rate when applicable on an annual basis is affordable but a 4% monthly interest rate adds up to 48% which is extremely high. You will be asked to fill in all of the required information about the car and submit proof of your residence and age.
Your income proof will be needed and you’ll be asked to submit a pay slip stub to ensure that you have the finances to return the money. Based on the Kelley Blue Book, the value of the car is going to be evaluated and the loan amount sanctioned is usually 25% to 50% of the amount. The loan amounts starts over $600 and goes to a maximum of $3000. It is best to plan in advance and check your repaying capabilities when you take a short term high interest loan.